[Calc Review] Help me analyze this deal

[Neil Greene]

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Greetings BP,

Great to be here again. I've got a duplex report posted here and I'm looking for that great BP advice.  This duplex was built in 1989 and is lead free (important in Mass).  I think it could go for about $165k-$170K. The realtor is friends with the owner and also a friend of mine--owner just wants to sell to purchase a property for her daughter.  I've been in the property and it needs no work. C class neighborhood.  Kind tenants. One is on Section 8.  Rents are currently $800 each unit, one is a two bedroom, the other a 3.  The three should have rent raised, so I put $1700 for rent just to be conservative.

According to the 2% rule this project is not good enough.   But the cash flow looks good, at $500+ a month. (I don't deduct for vacancy as I have an emergency account that I use for rental issues).

Question is this property worth it. I think it could be low maintenance and cash flow positive regularly.  Not the greatest neighborhood, but not terrible. I just thought, although the sale price is somewhat discounted, I could probably find a duplex with six bedrooms, lead certs around $180K and rent for $2600.  The think with the 1989 duplex is no work needed, easy tenants, and cash flow. Maye sell it after a year or two after gaining a little equity and selling closer to market rate?
What do you think?

Thank you kindly!

*This link comes directly from our calculators, based on information input by the member who posted.

[Brian Garlington]

If a duplex does not even meet the 1% rule in a C neighborhood I wouldn't even consider it.  You should see if the seller will lower the price.....THEN when you close on it see if you can raise rents.

Just because it was built in 1989 you never should "skip over" fees such as

Prop Mgmt

vacancy  (Yes it is occupied now but it won't always be)

insurance

repairs

capex

of course debt service (mortgage)

lawncare, cleaning and maintenance (Different from repairs)

trash

Do your tenants pay for water and sewer?  For my duplexes in cleveland and oakland I am resposible for water and sewage and trash

Check with rentometer to see what the average rent should be for the 3 bdroom and then go slightly below that to be conservative.   For the Sect 8 tenant, find out when was the last time their rent was raised and again...use rentometer to see what the rent could be.